The Reagan administration on Tuesday rejected further aid for the
country's largest synthetic fuels plant, sounding what Rep. Mike
Synar called the death knell for a multibillion-dollar program to
wean the nation from its dependence on foreign oil.
""Oil and natural gas prices simply have not proved high enough to
make the project economical,'' Energy Secretary John Herrington said
in rejecting a plan that would have provided $720 million in new
government subsidies for the Great Plains coal gasification plant
near Beulah, N.D.
Herrington complained in a letter to the quasi-government
Synthetic Fuels Corp. that the five private natural gas pipeline
companies sponsoring the $2.1 billion project had refused to increase
their exposure to possible financial losses.
""The government bears all the risks of lower prices until the
SFC's $720 million is exhausted,'' he said. ""On balance, the cost
of continuing to operate the plant significantly outweighs the
benefits under all but highly speculative assumptions.''
That reasoning was questioned by Synthetic Fuels Corp. chairman Ed
Noble, from Oklahoma, contacted by telephone in Washington, D.C.
"That's not correct," Noble said. "The idea that this is
commercial has been a fallacy from the beginning. Exposure in
everybody's judgement can be different. Their out of pocket exposure
would be greater two years from now than it is now. They've invested
about $500 million.
"You can use any kind of figures you want to but their exposure
would have increased along with the government's.
"Their exposure does increase, but not to the extent the
The Great Plains project is an insurance policy for the future,
Noble said, that would allow the nation to use its solid fossil
energy resources to manufacture gas in an energy crisis.
"Mike and anybody else can demagogue all over the place," Noble
said. "I think it's a mistake."
Allowing the project to be abandoned now rather than attempting to
keep it allive for another two years with federal price supports will
save the government $200 million, Herrington said.
His decision, revealed just three hours before the SFC's five
directors were scheduled to finish work on the $720 million aid
package tentatively approved two weeks ago, puts another nail in the
coffin for the agency itself.
""This is the death knell for the SFC,'' Synar said. ""This was
Noble disagreed. "This isn't even our project. It's a DOE
project. It has been from the beginning. The DOE has already
invested over $1.5 billion in the project.
"What we had proposed was price guarantees.
"Mike is given to a little bit of exageraton."
The agency was established by Congress in 1980 and given $20
billion to foster the development of commercial technologies for
converting coal and shale into liquid and gas fuel subsitutes for
imported oil. …